Under which section of the Internal Revenue Code has Craters & Freighters elected to be taxed?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
nized in 2024 and 2023.
Income Taxes
The Company has elected to be taxed under the S-Corporation provisions of the Internal Revenue Code. No provision for income taxes is reflected in the financial statements since this is a personal liability of the shareholder.
Uncertain Tax Positions
The Company is a pass-through entity and any changes as the result of an examination by the IRS or the Colorado Department of Revenue would not have an impact at the entity level.
The Company has adopted FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. The Company will record a liability for uncertain tax positions when it is more likely than not that a tax position would not be sustained if examined by the taxing authority. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and authoritative rulings.
Note 1: Summary of Significant Accounting Policies (Continued)
Uncertain Tax Positions (Continued)
The Company's evaluation on December 31, 2024 and 2023 revealed no uncertain tax positions that would have a material impact on the financial statements. The 2020 through 2023 tax years remain subject to examination by the IRS.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, Craters & Freighters has elected to be taxed under the S-Corporation provisions of the Internal Revenue Code. This means that Craters & Freighters itself does not pay corporate income taxes. Instead, the company's income and expenses are passed through to its shareholder(s), who then report these items on their individual income tax returns.
For a prospective Craters & Freighters franchisee, this information is relevant because it provides insight into the tax structure of the franchisor. As the shareholder is responsible for the income taxes, no provision for income taxes is reflected in the financial statements.
Additionally, the FDD states that Craters & Freighters is a pass-through entity, so any changes resulting from an IRS or Colorado Department of Revenue examination would not impact the entity level. The company's evaluation on December 31, 2024 and 2023, revealed no uncertain tax positions that would have a material impact on the financial statements. The 2020 through 2023 tax years remain subject to examination by the IRS.